Following numerous successful new initial public offerings (IPOs) and as Australian equity markets keep setting new record highs, private capital participants are starting to consider again whether IPOs are a credible and competitive exit route. But the playbook has evolved. Drawing on insights from a recent Gilbert + Tobin panel discussion with our experts on this topic, this article outlines the key strategic considerations and market trends reshaping the IPO landscape.
IPOs are the start of an exit process
More and more we are seeing IPOs as the start of an exit rather than a complete exit. Recent IPOs have all been tactically sized to leave the issuer with sufficient free float to meet requirements, which in Australia currently means at least 30% for the S&P/ASX indices (maintained by Standard & Poors), and the clear expectation of investors is that major existing shareholders will be escrowed for the forecast period (or approximately 12 months from listing, if the forecast period is shorter). However, recent IPOs have also included partial releases from escrow early where there has been share price outperformance. This means financial sponsors can view IPOs as being a staged exit: partial sell-down at IPO and subsequent block trades post escrow release.
The IPO window is open – but expectations have shifted
With superannuation inflows boosting equity markets and forward price-to-earnings ratios expanding, market conditions are ripe for issuance. However, successful IPOs today demand far more than just favourable macro tailwinds.
It’s no longer enough to just be a good business. You need a compelling narrative – preferably credible high-growth potential but the capacity to deliver dependable yield also makes you an attractive IPO candidate.
Despite bullish market conditions, investor sentiment remains cautious. The August 2025 earnings season has shown the market will punish (sometimes, dramatically) deviations from consensus views on a company’s growth outlook. Selective institutional appetite reflects lingering sensitivity to underperformance from previous IPOs and global volatility. Success now hinges on articulating risk-adjusted returns and scalable growth models.
Pre-IPO raisings now a key strategic lever
Pre-IPO rounds are increasingly used to validate valuation, secure institutional support and prime companies for future public market entry. They also provide an early opportunity for existing shareholders to achieve some sell-down. GYG and SiteMinder were cited as examples where high-quality institutional capital was brought in 12 to 18 months before listing, valuation expectations were set and some sell-down was achieved. Priced rounds, instead of convertible notes are also becoming much more common as this provides both capital flexibility and stronger investor alignment.
For globally ambitious companies, dual-track processes (IPO versus trade sale) (or ‘dual track lite’ processes, where the IPO is worked up in the background to be ready if needed) and cross-listings – particularly in the US – are being actively explored. These strategies offer flexibility in optimising valuation, capital access and investor base reach. Sponsors should assess these paths early in their exit planning.
Forecasts are not legally mandatory – but strategic communication is
Contrary to common misconception, financial forecasts are not a statutory requirement for IPOs in Australia. Instead, the law requires disclosure of a company's prospects. Where there are not reasonable grounds for a financial forecast, including a forecast is prohibited. Inclusion of a forecast is more about demonstrating conviction to new investors about the likely success of the company’s business and growth strategy. However, not all recent IPOs have involved a ’traditional’ 12-month financial forecast. Virgin Australia, for example, forecast to the end of its current financial year (effectively less than one month from prospectus lodgement). Virgin Australia also included longer dated statements about forecast benefits from its transformation program which was relevant to its message of expected future margin improvement. This offered enough disclosure to allow investors to model performance without providing explicit longer-dated financial forecasts. This is especially critical for very high-growth businesses or for businesses in sectors (like aviation) which are volatile, which can make forecasting unreliable.
Early preparation pays off
Even though the first half of 2025 saw high levels of market volatility there were a healthy number of successful IPOs (Virgin Australia’s bookbuild came after the initial shock of Trump’s Liberation Day tariffs had passed but before an escalation in the war in the Middle East and an air disaster in India). This demonstrates the value of early preparation to hit the window when it opens. Interestingly, virtually all the large IPOs in the past 18 months have not featured research analyst reports – this has allowed timetables to be more flexible and narrowed the time gap between finalisation of a draft prospectus and investor engagement.
ASIC's role is evolving and driving more upfront work
There is a marked shift in the role of the Australian Securities and Investments Commission (ASIC), driven by ASIC’s stated desire to improve the health of Australia’s public markets. ASIC recognises that the market needs a viable IPO market to achieve that.
ASIC’s recent announcement of a ‘fast-track’ process to reduce IPO timetables (which we have previously discussed in our insight article) will front end ASIC engagement on larger IPOs given ASIC is now open to pre-vetting entire prospectuses. We do not view this development as taking away the need to engage at an early stage with ASIC on disclosure issues that are critical to investment decisions (since pre-engagement with institutional investors will have occurred prior to the ASIC two-week pre-vetting period).
We look forward to hearing more from ASIC in coming months who have promised that they are considering industry feedback on other ways to assist the competitiveness of Australian IPO processes. Other areas of interest are the approach to pre-deal analyst research reports such as the “greenshoe” structure (that is, aftermarket stabilisation from listing) and guidance on forecasting.
ASIC’s initiatives will, we think (hope?), reduce IPO execution risk and provide issuers more certainty on disclosure positions and timing.
Free float requirements may soon shift – but with trade-offs
With S&P proposing to reduce the minimum free float from 30% to 15% for index inclusion and ASX flagging its openness to do the same for its own 20% free float listing condition, founders and sponsors may find more flexibility in structuring IPOs. However, reduced free float may extend the exit horizon for private equity sponsors, requiring a strategic balance between control and liquidity.
Key takeaways for sponsors and advisers
As IPO markets cautiously reawaken, private capital sponsors face both renewed opportunity and elevated expectations. The rules have changed. Strong macro conditions alone won’t carry a float. Instead, market success now hinges on proactive structuring, regulatory foresight and strategic narrative-building as well as defensible pricing. We are yet to see an IPO achieve lasting success without these qualities.
Key takeaways:
Start early: use pre-IPO rounds to secure institutional alignment and de-risk valuation well ahead of listing windows. This also might enable some partial liquidity to be realised.
Be prepared: institutional investors are increasingly focused on ESG maturity and governance quality in IPO candidates. Firms should address board composition, sustainability metrics and investor reporting capabilities early to avoid valuation haircuts or delayed bookbuilds. This is in addition to all the other usual things like having three years of audited financials in place and a solid management team.
Focus on narrative, not just numbers: forecasts should not be viewed as inflexibly needing to be provided for a 12-month period – what’s essential is clarity, comparability and a compelling investment thesis.
Track reforms: monitor evolving ASIC reforms and ASX free float policies to optimise structuring flexibility and exit horizons.
Think global: dual-track and cross-listing strategies are increasingly viable for high-growth companies seeking capital depth and broad investor bases.
Build investor confidence early: address legacy IPO concerns with transparency, credible metrics and a strong use-of-proceeds story.
By recalibrating the IPO strategy to reflect today’s market realities, sponsors can maximise optionality and achieve stronger outcomes in an increasingly sophisticated exit environment.